AT&T Reports Q3 Profit Down Slightly, Revenue Up

Revenue is up in the first partial quarter since AT&T acquired DirecTV in July. The revenue gain is largely due to the acquisition.

AT&T, which acquired DirecTV in July as it reshapes itself into a broader provider of business and consumer services, earned a $3.08 billion net profit in the third quarter of 2015 ended Sept. 30, while also posting $39.1 billion in consolidated revenue, which is up about 19 percent from one year ago largely due to the acquisition.
That net profit is slightly lower than the $3.19 billion reported for the same quarter one year ago, according to figures the company reported after the stock market closed on Oct. 22.
AT&T reported diluted earnings per share of 50 cents for the quarter, down from 60 cents per share paid one year ago for the same quarter.
Revenue from postpaid and prepaid consumer wireless customers combined was $8.78 billion, down from $9.2 billion for the third quarter one year ago. Postpaid customer revenue totaled $5.53 billion of that, while prepaid revenue totaled $1.2 billion.

AT&T reported 54.8 million mobile subscribers for the end of the quarter, down from 56.1 million one year ago. Total customer churn was 1.33 percent, which is up slightly from 1.2 percent posted one year ago.

"We turned in outstanding financial results in the quarter," Randall Stephenson, the chairman and CEO of AT&T, said in a statement. "Our early integration efforts with DirecTV are going very well and we've just begun to scratch the surface on the video, wireless and broadband cross-selling opportunities."
AT&T now has a product assortment that is unique from its competitors, Stephenson, added. "With our national wireless and video capabilities, as well as our extensive broadband network, we now have assets that make us a unique competitor and the first scaled, fully-integrated U.S. service provider."
A couple of areas of AT&T's "very good" 3Q15 caught the attention of Bill Menezes, a unified communications analyst at Gartner. "First, most of its strong net phone subscriber adds were from prepaid customers, an area AT&T indicated it would emphasize when it acquired the Cricket Wireless business," he told eWEEK. "Although prepaid business historically has a high churn rate, it no longer is the domain solely of customers with no credit. Keep watching to see if AT&T can sustain growth in this area.
"Second, the net adds of 1 million connected cars reflects AT&T's focus on connected devices as a growth area, given the near saturation of the cellular phone business," Menezes added. "This quarter reflects well on that strategy."
AT&T's operating expenses were $33.2 billion versus $27.4 billion one year ago, while operating income was $5.9 billion, compared with $5.6 billion in Q3 2014.
AT&T said it expects its full-year earnings per share will be in the $2.68 to $2.74 range, with free cash flow in the $15 billion range or better.
AT&T acquired DirecTV for $48.5 billion in July after pursuing the merger since May 2014.
The DirecTV acquisition was approved on July 24 after a review by the Federal Communications Commission under several conditions, including that AT&T expand its deployment of high-speed, fiber-optic broadband Internet access service to 12.5 million customer locations, as well as provide lower rates for services to schools and libraries, according to an earlier eWEEK report.
AT&T and its DirecTV unit are also prohibited from using discriminatory practices to harm online video distribution services and must submit so-called Internet interconnection agreements to the FCC for review under the approval. Finally, the company will also be required to offer discounted broadband services to low-income consumers under the terms of the FCC's approval. The conditions for the deal are in effect for four years.
The completed acquisition means that AT&T is now the largest pay TV provider in the United States and the world, servicing more than 26 million customers in the United States and more than 19 million customers in Latin America, including Mexico and the Caribbean, according to the company. AT&T also says it has more than 132 million wireless subscribers and connections in the United States and Mexico, while offering 4G LTE mobile coverage to almost 310 million people in the United States.
In July, AT&T had reported second-quarter revenue of $33 billion, up slightly from $32.6 billion in the same quarter last year, while net income of $3 billion for the quarter ended June 30 compared with $3.6 billion a year earlier.
Analysts were bullish about AT&T's Q2 results and its outlook because of the addition of new wireless customers, the acquisition of two Mexican telecoms and the approval of the DirecTV acquisition, according to an earlier eWEEK report. The $33 billion revenue figure for the first time included earnings from the company's recent acquisitions of telecoms in Mexico.